The Jordan Cove liquefied natural gas (LNG) project in Oregon has won preliminary federal export approvals, but has drawn the ire of the state attorney general’s office. Backers expressed confidence the project is still on a positive track to be a combination import-export facility.

In a first step to gaining broader approvals, Jordan Cove last Wednesday gained an initial approval from the U.S. Department of Energy (DOE) to export LNG. Project officials called it a “procedural” step needed to seek broader DOE and Federal Energy Regulatory Commission (FERC) approvals. Oregon Attorney General John Kroger has filed with FERC asking the regulators to revoke permits for the LNG project at Coos Bay and a related transmission pipeline along the south-central coast of Oregon.

On Dec. 2, the Oregon attorney general claimed in a filing with FERC that an import-export facility would drive up energy costs for consumers in the Pacific Northwest.

Jordan Cove had applied to DOE last September for authorization to export up to 438 Bcfe of LNG annually. In October the state of Oregon filed a protest to the DOE application, but the federal agency dismissed the state’s arguments at that time.

Last Wednesday’s approval only clears the way for exports to free-trade agreement nations, which do not include the major Pacific Rim gas market countries such as China and Japan. DOE’s action, however, allows Jordan Cove now to pursue export approvals from the Federal Energy Regulatory Commission (FERC) to make the project an import-export facility.

Backers of the project along Oregon’s south-central coast said last month they would seek to make their proposed LNG facility and its 1.2 Bcf/d connecting transmission pipeline a dual export-import project, meaning the pipeline flow would be reversible. An initial proposed import terminal and the Pacific Connector pipeline were both approved conditionally by FERC in 2009.

Although initially limited, the DOE export license was needed before FERC would consider an export request from Jordan Cove, said Project Manager Bob Braddock. Backers plan to make the filing early next year, Braddock told NGI.

“The sequence is that you have to have an export license before FERC will take you seriously,” Braddock said. “We applied for a [DOE] export license just like every other terminal has done. It is more of a procedural step than substantive.”

FERC has the responsibility to permit the construction and operation of LNG facilities. DOE has the responsibility to establish whether exporting LNG is in the national interest. “They don’t make that determination with the free trade agreement nations because they have already integrated our markets with those nations,” Braddock said.

Eventually, Jordan Cove will have to request another approval from DOE to ship gas to non-free trade nations. “We will do that probably sometime early next year,” Braddock said. “That’s a more laborious process in which we submit a lot of analysis on why our exporting gas would be a net benefit to the United States.”

In the eventual DOE filing, Jordan Cove will have to address the issue of future exports’ potential impact on domestic gas prices, along with a host of other issues, Braddock said.

Oregon’s chief legal officer contends that the Jordan Cove project will raise natural gas prices domestically and therefore it is no longer in the public interest.

Jordan Cove’s announcement in September that it was expanding its proposed project to an import-export facility for LNG apparently caused the attorney general’s office to conclude that an exporting business would tend to upset the current balance of abundant supplies and low prices for North American natural gas, driving up domestic prices as global markets hungry for cheap gas cut into the current surpluses.

Fort Chicago Energy Partners is the main backer of the LNG project, and one of its affiliates, along with Williams Pacific Connector Gas Pipeline LLC and PG&E Strategic Capital Inc., are the partners in the 234-mile, 36-inch diameter Pacific Connector Pipeline Project connected to Jordan Cove and similarly approved by FERC.

Braddock told NGI last Tuesday that Jordan Cove expects to make a response to Oregon’s filing as part of FERC’s pre-filing process in January. The International Port of Coos Bay, which is strongly supportive of the LNG project, may respond directly to Kroger, according to Braddock.

Braddock said he was not surprised by Kroger’s action because the attorney general has generally opposed any fossil fuel development for the past three years. “He [Kroger] was against any use of oil or natural gas when I first met him [in October 2008] and has never wavered from that position,” he said. “He does not speak for the state, though, and will leave office next year.”

“Exportation of domestic natural gas will reduce the supply available to the U.S. residential and industrial consumers, [and that is] likely to result in increasing the domestic price of natural gas, which will have a consequent adverse impact on the regional economy,” Prewitt wrote in the FERC filing.

Other local news reports also play up the new supplies of gas to the Pacific Northwest coming from the Rockies through El Paso’s Ruby Pipeline, bringing supplies at around $4/MMBtu, compared with prices in other global markets such as the Far East, which buys LNG at prices up to $11/MMBtu. This further makes the LNG facility less necessary, they argue.

Braddock did not say how Jordan Cove intends to respond to these issues in its upcoming FERC filing, but he was adamant that the project backers will respond.

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